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The Design of Business: Why Design Thinking is the Next Competitive Advantage
The Design of Business: Why Design Thinking is the Next Competitive Advantage
by Roger L. Martin
Edition: Hardcover
Price: $20.46
102 used & new from $9.98

4 of 5 people found the following review helpful
5.0 out of 5 stars An important book for business developers and business model innovators, July 2, 2010
The Design of Business: Why design thinking is the next competitive advantage, by Roger Martin was a positive surprise as it was a quick read, well structured, delivered several interesting concepts and some in depth cases on business model innovation. Even though several of the cases are familiar for many readers (such as P&G, Apple, Cirque du Soleil, McDonalds and RIM) Roger, who is dean of the Rotman School of Management at the University of Toronto, professor of strategic management, and author of the book The Opposable Mind, adds interesting perspectives and sometimes information from behind the scenes working as a consultant and advisor. The book is an extension of Roger's popular article (free download via [...]) from 2004 with the same name.

The book in three bullet points:

* It introduces and explores the concept of the "Knowledge Funnel" describing how knowledge advances from mystery to heuristic, to algorithm for businesses to gain efficiency and lower costs, and the activities of moving across the knowledge stages (exploration) and operating within each knowledge stage (exploitation).

* To accelerate the pace at which knowledge advances through the Knowledge Funnel, it presents the concept of design thinking as the necessary balance between analytical thinking using deductive and inductive reasoning (with the need for reliability and the ability to produce consistent and predictable outcomes), and intuitive thinking (with the need for validity and to produce outcomes that meet a desired objective).

* It discusses challenges (primarily the results of proof-based analytical thinking) faced by organizations, CEOs and individuals within organizations, to build structures and processes that foster, support and reward a culture of design thinking, and how different CEOs have used different approaches to generate successful outcomes.

A brief summary of the different chapters:

1. The knowledge funnel: How discovery takes shape
The introductory chapter starts with a story about McDonalds journey from mystery (how and what did Californians want to eat) to algorithm (stripping away uncertainty, ambiguity, and judgment from almost all processes). It briefly discusses analytical thinking, intuitive thinking and design thinking, to solve mysteries and advance knowledge, and the fine balance between exploring new knowledge and exploiting existing one.

It introduces and explores the concept of the "Knowledge Funnel" describing how knowledge advances from mystery to heuristic, to algorithm for businesses to gain efficiency and lower costs. This is explored also in later chapters: "Mysteries are expensive, time consuming, and risky; they are worth tackling only because of the potential benefits of discovering a path out of the mystery to a revenue-generating heuristic", "The algorithm generates savings by turning judgment... ...into a formula or set of rules that, if followed, will produce a desired solution" and "Computer code - the digital end point of the algorithm stage - is the most efficient expression of an algorithm".

It also addresses the need for organizations to re-explore solved mysteries, even the founding ideas behind the business, and not get too comfortable focusing on the "administration of business" running an existing algorithm.

In addition, the first chapter presents abductive logic, and some ideas originated by philosopher Charles Sanders Peirce; that it is not possible to prove a new thought concept, or idea in advance and that all new ideas can be validated only through the unfolding of future events. To advance knowledge we need to make a "logical leap of the mind" or an "inference to the best explanation" (or "Leaps of Faith" that John Mullins and Randy Komisar calls it in the book Getting to plan B see review/summary at[...]) to imaging a heuristic for understanding a mystery. Free preview of Chapter 1 (link at [...])

2. The reliability bias: Why advancing knowledge is so hard
The second chapter focus on the distinction between reliability (produce consistent, predictable outcomes by narrowing the scope of a test to what can be measured in a replicable, quantitative way) and validity (produce outcomes that meet a desired objective, that through the passage of time will be shown to be correct, often incorporating some aspects of subjectivity and judgment to be achieved). Roger's main point in the chapter (or even in the book) is that today's business world is focusing too much on reliability (due to three forces: demand for proof, an aversion to bias and the constraints of time), with algorithmic decision-making techniques using various systems (such as ERP, CRM, TQM, KM) to crunch data objectively and extrapolate from the past to make predictions about the future. "What organizations dedicated to running reliable algorithms often fail to realize is that while they reduce the risk of small variations in their businesses, they increase the risk of cataclysmic events that occur when the future no longer resembles the past and the algorithm is no longer relevant or useful" With the turbulent times we live in, where new mysteries constantly spring up that reliable systems won't address or even acknowledge, businesses risk being outflanked by new entrants solving old and new mysteries developing new heuristics and algorithms. "Without validity, an organization has little chance of moving knowledge across the funnel. Without reliability, an organization will struggle to exploit the rewards of its advances... the optimal approach... is to seek a balance of both"

3. Design thinking: How thinking like a designer can create sustainable advantage
Chapter three starts with an interesting case of Research In Motion (RIM) that leads into the discussion of what is really design thinking. Roger uses the quote by Tim Brown of IDEO, "a discipline that uses the designer's sensibility and methods to match people's needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity" and adds himself "a person or organization instilled with that discipline is constantly seeking a fruitful balance between reliability and validity, between art and science, between intuition and analytics, and between exploration and exploitation". That designers live in the world of abductive reasoning, actively look for new data points, challenge accepted explanations to posit what could possibly be true (in contrast to the two dominant forms of logic - deduction and induction, with the goal to declare a conclusion to be true or false).

The chapter ends with the first discussion on roadblocks to design thinking (many more to come), with one being the corporate tendency to settle at the current stage in the knowledge funnel, and another how "highly paid executives or specialists with knowledge, turf and paychecks to defend" has the company's heuristics in their heads with no interest in advancing to the algorithm stage, making the executives less important. This leads nicely into the forth chapter about the transformation of Procter & Gamble.

4. Transforming the corporation: The design of Procter & Gamble
A.G. Lafley's transformation of Procter & Gamble from an incumbent in crisis to an innovative and efficient organization in just a few years has been widely covered in the business literature. As a student some years back I made an internship in P&G's Connect & Develop (connect with innovators outside the company and develop their ideas for P&G products), and have since been reading up on everything I can find about the transition and why other companies have not been able to make the same transition. Roger adds interesting perspectives, from his work with the company and its first vice president of innovation strategy and design, Claudia Kotchka, to develop "a comprehensive program that would provide practical experience in design thinking to P&G leaders". One of the top-down efforts being to drive brand-building from heuristic (in the minds of scarce and costly senior executives) toward algorithm, providing less senior employees the tools needed to do much of the work previously done by high-cost elites who then could then focus on the next mystery in order to create the next brand experience. The chapter also covers the Connect & Develop initiative and how it bulked up P&G's supply of ideas in the mystery-heuristic transition where it was thin, enabling it to feed more opportunities into its well-developed heuristics and algorithms of development, branding, positioning, pricing and distribution.

Another highly interesting topic covered in the chapter is the change of processes within P&G, including the strategy review, at P&G. Lafley recognized that the existing processes was a recipe for producing reliability, not validity, "so risky creative leaps were out of the question". A transition from annual reviews with category managers pitching, "with all the inductive and deductive proof needed to gain the approval of the CEO and senior management" to "forcing category managers to toss around ideas with senior management... to become comfortable with the logical leaps of mind needed to generate new ideas".

5. The balancing act: How design-thinking organizations embrace reliability and validity
The chapter focuses on the need to balance reliability and validity, and the challenges to do so (foremost all structures, processes and cultural norms tilted towards reliability). "Financial planning and reward systems are dramatically tilted toward running an existing heuristic or algorithm and must be modified in significant ways to create a balance between reliability and validity". Roger presents a rough rule of thumb "when the challenge is to seize an emerging opportunity, the solution is to perform like a design team: work iteratively, build a prototype, elicit feedback, refine it, rinse, repeat... On the other hand, running a supply chain, building a forecasting model, and compiling the financials are functions best left to people who work in fixed roles with permanent tasks". The chapter feels somewhat repetitive, in the uphill battle for validity, and more obstacles of change are presented:

* Preponderance of Training in Analytical Thinking
* Reliability orientation of key stakeholders
* Ease of defending reliability vs. validity

In this chapter, Roger also discusses how design-thinking companies have to develop new reward systems and norms, with an example of how to think about constraints. "In reliability-driven, analytical-thinking companies, the norm is to see constraints as the enemy", whereas when validity is the goal "constraints are opportunities" and "they frame the mystery that needs to be solved".

6. World-class explorers: Leading the design-thinking organization
In chapter six several interesting cases, and approaches of different CEOs, are presented, one being the widely covered case of Guy Laliberté, and his Cirque du Soleil. Again Roger adds to the existing body of knowledge with the twist of reliability vs. validity in creating a new market, and the knowledge funnel taking a one-off street festival into an unstoppable international $600 million-a-year business with four thousand employees. Laliberté has reinvented Cirque's creative and business models time and time again, "usually over protests that he was fixing what was not broken and that he could destroy the company". Other CEOs and cases covered in the chapter are James Hackett of Steelcase, Bob Ulrich of Target, and Steve Jobs of Apple.

The role of the CEO and different approaches to build design-friendly organizational processes and norms into companies are discussed referring to the different cases presented.

Again, Roger returns to the reliability vs validity battle, now from a CEO perspective with terms such as "resisting reliability", "those systems-whether they are for budgeting, capital appropriation, product development...", and "counter the internal and external pressures toward reliability".

7. Getting personal: Developing yourself as a design thinker
In the final chapter the focus is on how a non-CEO can function as a design thinker and develop skills to individually produce more valid outcomes even in reliability-oriented companies. Roger refers back to his previous book The Opposable Mind, and the concept of a personal knowledge system as a way of thinking about how we acquire knowledge and expertise. The knowledge system has three components:

* Stance: "Who am I in the world and what am I trying to accomplish?"
* Tools: "With what tools and models do I organize my thinking and understand the world?"
* Experiences: "With what experiences can I build my repertoire of sensitivities and skills.

Roger then presents the design thinker's stance, key tools (observation, imagination, and configuration), and how to obtain experiences by trying new things and test their boundaries.

Roger also presents five things that the design thinker needs to do to be more effective with colleagues at the extremes of the reliability and validity spectrum:

* Reframe extreme views as a creative challenge
* Empathize with your colleagues on the extremes
* Learn to speak the languages of both reliability and validity
* Put unfamiliar concepts in familiar terms
* When it comes to proof, use size to your advantage

This is a great book and I recommend business developers and business model innovators to buy it, as it is a quick read with several important concepts and interesting cases to learn from. I believe design thinking has the potential to help managers break out from the Matrix they live in and again realize the real world behind the existing algorithms.

Disclaimer:
I read the book at the beautiful cliffs of Vernazza in Italy, and was in a very good mood. I actually read the book twice.


Seizing the White Space: Business Model Innovation for Growth and Renewal
Seizing the White Space: Business Model Innovation for Growth and Renewal
by Mark W. Johnson
Edition: Hardcover
Price: $19.86
82 used & new from $11.19

82 of 95 people found the following review helpful
3.0 out of 5 stars Business Models 101 - adds very few new ideas to the existing body of knowledge, March 7, 2010
The book is a rather quick read and primarily for people who have not read Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Alex Osterwalder, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant by W. Chan Kim and Renée Mauborgne, and Clayton M. Christensen's The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business.

For people who have followed the development of the business model concept, and read case studies such as Southwest Airlines, Hilti, Xerox, Kodak, DEC, FedEx, and Tata, this book is a bit of a disappointment. I looked forward to reading this book and wanted it to be a 5 star experience, but after reading it I have more questions about the author and the writing of the book, than about any new content or ideas.

The book in three bullet points:

* It presents the concept "White Space" defined as an area where new or existing customers are served in fundamentally different ways and there is a poor fit with the current (incumbent) organization; "The range of potential activities not defined or addressed by the company's current business model".

* It provides a business model framework, "The four box business model", comprising a customer value proposition, a profit formula and key resources and processes, very similar to the model presented in the 2008 HBR article Reinventing Your Business Model by Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann, with the focus point on the customers' job-to-be-done.

* It briefly explores the circumstances when a new business model might be needed, being when you must change your current profit formula (overhead cost structure, resource velocity or both), develop many new kinds of key resources and processes, and/or create fundamentally different core metrics, rules and norms to run your business.

A brief summary of the different chapters:

1. The White Space and Business Model Innovation
Introductory discussion on core vs. non-core business, defining the white space that lies far outside an organization's usual way of working, where assumptions are high and knowledge is low. In contrast to the Blue Ocean concept, described in the book Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, (not mentioned in Seizing the White Space), the white space focus on what a specific organization can do, whereas blue ocean is about doing things differently than competition to be in uncontested markets. In the first chapter Mark includes a nice table on companies founded in the last quarter century that have entered the Fortune 500 in the last decade.

The book contains some questionable statements without references or discussion and chapter one is no exception: "Most successful innovative business models are forged by start-ups" (p. 18) - I would like to see the reference and discussion (and definition of "successful", "innovative" and "start-up") as most examples and discussions covered in this book are not on start-ups.

2. The Four-Box Business Model Framework
The chapter starts off with the discussion about lack of shared vocabulary, "No one to my knowledge squarely focuses on the elements in the business system that are central to value's creation and delivery and the way those elements work together to ensure or impede the overall success of the enterprise" (p. 23) I laughed out loud when I read the references related to the statement above, all from the same page: Peter Drucker (Harvard Business Review), Joan Magretta (Harvard Business School, former strategy editor Harvard Business Review), Henry William Chesbrough x2 (Harvard Business School Press). I would argue that the MAIN reason why there is a lack of shared vocabulary regarding business models is due to academics/consultants that ignore the work of other academics/consultants working in other schools/companies than their own.

The first element of Mark's Four-Box Framework (see figure at tbmdb) is the Customer Value Proposition (CVP), an offering that helps customers more effectively, reliably, conveniently, or affordably solve an important problem (or satisfy a job-to-be-done) at a given price. In some versions of the model, such as Figure 9, 19, 20 and 24, there is no explicit customer mentioned in the CVP. In other versions, such as Figure 21 and in the model presented in the 2008 HBR article "Reinventing you business model", a target customer is included. The second element is the Profit Formula that defines how the company will create value for itself and its shareholders. It specifies the revenue model, the cost structure, target unit margin and how quickly resources need to be used to support target volume. The third element is Key Resources, the people, technology, products, equipment, information, channels, partnerships, funding, and brand required to deliver the value proposition to the customer. The fourth and final element is Key Processes such as design, development, sourcing, manufacturing, marketing, hiring and training by which a company delivers on the customer value proposition. Readers familiar with popular concepts such as Osterwalder's business model canvas recognize most terms and ideas.

3. The White Space Within: Transforming Existing Markets
Chapter three discuss business model innovation opportunities within existing markets by delivering new customers value propositions, something Mark argues often relate to predictable shifts in what customers are willing to pay a premium price for (at least the primary basis of competition). He presents an argument based on one example on how companies compete and differentiate with different forms of innovation (see figure at tbmdb). The references used for the "predictable shifts" are to colleague Christensen's The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business (Collins Business Essentials), and Geoffrey A. More's Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers, a book about selling disruptive products to mainstream customers. I would love to read more about these shifts, the research behind it, and how for example design and the use of brands affects the shifts in the basis of competition? The chapter contains a nice case study on Dow Corning and Xiameter (mostly covered in HBR article from 2009), and the more classical case studies on Hilti, FedEx and IKEA.

4. The White Space Beyond: Creating New Markets
Seizing the white space beyond means developing new business models to serve entirely new customers and create new markets, often where large groups of potential customers are shut out of a market because existing offerings are too expensive, complicated or that the potential customers lack access. In the chapter Mark provides a table of archetypal business models and a nice case study on Hindustran Unilever and the Shakti Initiative together with some shorter versions covering MinuteClinic and SAP.

Obvious concepts to discuss in relation creating new markets are the tools, frameworks and methodologies presented in Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, by W. Chan Kim and Renée Mauborgne. Even though the Blue Ocean Strategy concepts are trademark protected, registered by ITM Research (INSEAD), other authors have been able to refer to the concepts and tools presented in the book.

5. The White Space Between: Dealing with Industry Discontinuity
Chapter five focus on the uncharted territory between what was and what is to be, after game changing events such as the commercialization of Internet technology or the push to address greenhouse gas emissions. Mark presents ideas in relation to unpredictable or radical shifts in market demand, in technology and in government policy targeted at the business environment. Examples are in the defense industry (transformative market shifts), Encyclopaedia Britannica (technology driven shifts), and Better Place (shifts in government policy and regulation). The chapter also contains a nice table including the industries and infrastructure of each technological revolution, from Carlota Perez' Technological Revolutions and Financial Capital.

6. Designing a New Business Model
In the chapter Mark discusses the business model innovation process from identifying a job-to-be-done to creating the customer value proposition, and compares the new business model that would be required with the existing model. When searching for unfilled jobs-to-be-done Mark puts emphasis on not only functional aspects of a job but also its social and emotional aspects, together with a short reflection on that Web 2.0 tools give businesses the ability to deeply understand their customers through increased interaction, with Threadless as an example. He introduces a way to use levers to contrast offerings, and mentions the reverse income statement to working up the projections for a business with a new profit formula. This chapter also contains an original and interesting case study from a project undertaken by Innosight with the customer name changed for purposes of confidentiality and a table with business model analogies.

7. Implementing the Model
For the implementation of a new business model, Mark describes three stages: incubation (1-3 years), acceleration (2-5 years), and transition (1-3 years). Incubation is the process of testing (early, cheaply and often) to identify and verify the assumptions most critical to success. Once the new model is proven viable, the Acceleration stage focus on setting up processes, together with rules, norms and metrics, to make the business model profitable. The final stage addresses the question if the new business can be integrated into the core or if it must remain a separate unit in order to thrive. Mark also discusses acquisitions and some successful and less successful examples.

8. Overcoming Incumbent Challenges
In the final chapter Mark describes three dangers incumbent face when implementing new business models: 1) Failure the allocate resources, 2) The Urge to cram new opportunities into the existing business model, and 3) Impatience for growth. He also briefly addresses the problem of the existing rules, norms, and metrics used by the company something that would be very interesting to dig deeper into.

My main questions after reading this book:
Why do Mark ignore existing body of knowledge and obvious references when defining the White space and his business model framework, and instead almost exclusively refer to his own or colleagues' work? Why does he focus so much on old examples, already covered in other books and articles, without using his frameworks to provide more depth into the cases? Why not look at modern examples of companies pushing its core business into new areas? Why are several included figures not referenced in the text, nor referenced for source?

A quick comparison with some other popular books on business models:

* Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder and Pigneur is the obvious book to compare with. It also aims to introduce a standard language, a business model framework, and ideas on how to develop, test and implement new business models. In contrast to Seizing the White Space, Business Model Generation uses many sources and refers to popular management concepts, including Blue Ocean Strategy when looking at new market opportunities. Osterwalder focus much more on the customer and customer segments, and have that as a very explicit element of the business model framework. For me, Business Model Generation is a more original and content rich book. See separate review of this book.

* Getting to Plan B: Breaking Through to a Better Business Model by John Mullins and Randy Komisar focus more on the financials and the start-up situation. It defines the business model slightly different from the two books above but shares the idea to experiment and adjust the business model as you learn new things. See separate review of this book.

* The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read. See separate review of this book.

* Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

All in all, Seizing the White Space is a good book, containing many valuable lessons. It will not WOW you, and it presents surprisingly few new case studies. One of the most important (implicit) lessons from the book is that business models need to be consciously designed and that companies must always stay on their toes looking for new opportunities around their core business, but also in the white space.

//Anders, The Business Model Database

Addition April 4th:
After reading Mark W. Johnson's comment on my review, I read several parts of the book again, and I want to add that the case study in the beginning of the book on Lockheed Martin's Hybrid Airship, not mentioned in my book review, is really novel.
Comment Comments (4) | Permalink | Most recent comment: Apr 23, 2010 8:18 AM PDT


Getting to Plan B: Breaking Through to a Better Business Model
Getting to Plan B: Breaking Through to a Better Business Model
by John W. Mullins
Edition: Hardcover
Price: $22.22
130 used & new from $9.71

70 of 72 people found the following review helpful
4.0 out of 5 stars A good book on iterating to improve business models, and how different elements affect the financials of the company, January 16, 2010
The book, written by John Mullins and Randy Komisar, contains several important lessons, primarily for start-up entrepreneurs, on developing successful business models. Though very repetitive around a few key ideas, the book is well worth reading especially for those who want to better understand how the business model is reflected in the different financial statements. with interesting examples from: Amazon, Apple, Celtel, Costco, Dow Jones & Company, eBay, GlobalGiving, GO airlines, Google, Oberoi Hotels, Pantaloon, Patagonia, Ryanair, Shanda, Silverglide, Skype, Southwest Airlines, Toyota, Walmart, Zara and ZoomSystems.

The book in three bullet points:

* The business model concept is in the book defined as the pattern of economic activity comprising of five key elements that together determines the viability of any business. The five key elements being the revenue model, the gross margin model, the operating model, the working capital model and the investment model. Companies are successful when the five elements work together.

* Getting to Plan B is about the process of discovering a business model that works, with the assumption that the initial plan is most often wrong. The discovering process can be made systematic by constantly formulating different hypothesis and measurements and continuously follow up and iterate the business model into a new Plan B.

* The starting point for a new business model is to learn from successful examples worth mimicking in some way and examples to which you explicitly choose to do things differently, where the ultimate judge is the customers and the cash flow generated from your business model.

A brief summary of the different chapters:

1. Don't reinvent the wheel, make it better - the concepts of analogs (successful predecessors), antilogs (predecessors that you want to differ from), and Leaps of Faith (beliefs about answers with no evidence) is covered with the key take out to learn, mix and match to create your own business model, to experiment to test different hypothesis to prove or refute them.

2. Guiding your flight progress - the concept of dashboarding (a systematic way to guide experiments and track results) is presented with examples showing that measuring of specific parameters or results increases the focus of the company's activities, and that the dashboards, including parameters and goals, need to evolve over time based on the learnings they uncover.

3. Air, food and water - the chapter, focusing on revenue models, hits home two important points: the importance of resolving customer pain or providing customer delight, and the need for actual evidence of how customers are likely to respond. To develop a revenue model questions that need to be asked are: Who will buy? What will they buy? Why will they buy? How soon, how often, and how many will they buy? With what effort and cost on your part? At what price will they buy, and on what basis will they pay?

4. Avoiding rocks and hard places - the topic for the chapter is gross margin models; the spread between the price at which products and services are sold and the cost of selling those (COGS). The key messages with the chapter is that digital technology enables gross margin models in which COGS approaches zero, that a superior gross margin model creates leverage that can be applied differently depending on strategy, and finally the fact that pricing decisions should be value-based and not cost-based.

5. Trimming the fat - is a short chapter on operating costs; all the day-to-day costs that must be incurred in addition to COGS. Key ideas are that by doing things differently in relation to other actors in the industry, operating cost can be lowered or eliminated, and by starting the analysis at the most costly or scarcest resources in the industry areas for business model innovation might occur. Another key point is that adding costs might also enhance the customers' experiences and willingness to pay premium prices, so cost cutting is not always the answer to profitability.

6. Cash is king - is according to me one of the more important chapters in the book as the balance sheet, working capital and cash management is often forgotten in business model discussions. Different industries and business models requires different amount of working capital (the cash a company needs to keep the business running) and all elements in the business model have implications for the cash generated and the cash consumed. From page 139: "Failure to earn a profit won't put you out of business, as long as you still have cash. But if you run out of cash, even if you are profitable, you'll be gone in a heartbeat"

7. It takes money to make money - focus on the investment needed to get the business started and through the period until it can generate enough cash itself, and the general goal (there are exceptions) is to find a way to get to breakeven with as little investment as possible. The authors mention some of the many trade-offs involved with external funding from different sources, but primarily focus on venture capital. The conclusions are: Less investment means giving away less of the business, less credibility lost when leaving a business model for another, and fewer sleepless nights if you've mortgaged your house.

8. Can you balance a one-legged stool? - tries to summarize, at least on a conceptual level, the different elements of the authors' definition of a business model, and their implications on one another. The conclusion is that the revenue model, gross margin model and operating model directly affect the working capital model, and these four models directly affect the investment model.

9. Getting started on discovering your Plan B - ends the book where it started with a focus on the talented and visionary entrepreneur. In the beginning of the book there were statements such as "Intuitively, as is almost always the case for committed, passionate, entrepreneurs, they felt that the answers to all five questions were yes" (p29) and in the end "dreaming your entrepreneurial dream" (p214).

A quick comparison with some other popular books on business models:

* The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book.

* The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read.

* Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

* Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder and Pigneur, atempts to introduce a standard language and format for analyzing and innovating business models based on the business model canvas. The book that was co-written with 470 practitioners is a great book to learn about different business models and tools for business model innovation.

All in all, the book is somewhat repetitive and rather long for the ideas it delivers, but with many interesting examples and important chapters on gross margins, operating costs and cash flow, it is well worth reading and a good complement to other books on business models not going into the financial details.

//Anders, The Business Model Database
Comment Comments (3) | Permalink | Most recent comment: Jun 16, 2013 10:04 AM PDT


The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model
The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model
by Donald Mitchell
Edition: Hardcover
Price: $35.96
74 used & new from $0.01

2 of 3 people found the following review helpful
3.0 out of 5 stars Mediocre in both content and structure, December 11, 2009
This a practical book highlighting the need to reassess business models. It is one of the most popular books on business models on Amazon but to my surprise I found it mediocre in both content and structure.

The book is much too long for the points it delivers and the authors do not dive into the subject of business models more than briefly. It is a basic book on marketing with some ideas and questions relating to One-sided business models. It is filled with obvious statements such as "Be hard to overtake" without any discussions about unique assets, capabilities, processes or control mechanisms, and uses headings such as "Provide sustained benefits for all stakeholders" but in text only focus on customers. If you plan to operate a lemonade stand this book is perfect for you.

//Anders, The Business Model Database


The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits
The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits
by Adrian J. Slywotzky
Edition: Paperback
Price: $13.16
104 used & new from $0.01

1 of 2 people found the following review helpful
4.0 out of 5 stars A quick read on business model design, December 11, 2009
This is a quick read and according to me a rather good book in the quick-read-business-genre. It is divided into three parts where the first part discusses business models and how profit happens. The second part is about successful business design reinventors such as Jack Welch (GE), Nicolas G Hayek (SMH) and Roberto Goizueta (Coca-Cola). In the third part the authors summarize its customer-centric and profit-centric thinking in what they call The Profit Zone Handbook.

The customer-centric view is dominant in the book and the main recommendation is to truly understand the customer behavior, decision-making process, price sensitivities and preferences, and design the business model accordingly. Businesses must be designed for profitability and as the arena in which high profit is possible keeps changing, so must the business model.

The main questions repeated several times are:
- Where will I be allowed to make a profit in this industry?
- How should I design my business model so that it will be profitable?

// Anders, The Business Model Database


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